Citigroup stock falls after higher expense forecast spooks investors

Citigroup shares fell 5.3% after management signaled that expenses would rise in the second half, even as the bank posted a strong second quarter and beat Wall Street expectations.

Citigroup reported net income of $5.8 billion, or $3.15 per diluted share, on revenue of $24.8 billion, its best quarterly revenue in a decade. Net income rose 45% from $4.0 billion a year earlier, helped by stronger performance in markets and investment banking. Equities trading revenue climbed 45% to $2.3 billion, fixed-income trading revenue rose 7% to $4.7 billion, and investment banking revenue jumped 44% to $1.55 billion.

Jane Fraser and chief financial officer Gonzalo Luchetti told analysts that Citigroup would pull forward some of the $5 billion in additional investments it had previously said were needed to win more market share. That raised the risk that higher spending will eat into later profits, even after a quarter that showed the bank can still produce growth across several businesses.

Citigroup kept its full-year return on tangible common equity target at 10% to 11%, despite a first-half return of 13.1%. Ebrahim Poonawala of Bank of America pointed to high expectations and muddled messaging, while Chris Kotowski of Oppenheimer cast the reaction as a backlash to guidance that suggested a tougher second half.

Mike Mayo of Wells Fargo took a more upbeat view, calling the extra spending an “offense” move rather than restructuring, while still saying Citigroup should beat its 11% profitability target in 2026. The bank returned about $5.0 billion to common shareholders through buybacks and dividends, announced a $30 billion buyback plan and a 12% dividend increase, and ended the quarter with a Common Equity Tier 1 capital ratio of 12.8%.

Citigroup’s next earnings call is October 13.